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Abstract:
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Exchange traded investment funds’ only asset is a portfolio of different securities, which investors
can invest in by buying the listed shares issued by the fund. This thesis investigates the exchange
traded investment funds on the OMX Copenhagen Stock Exchange (CSXE), their characteristics
and performance. The thesis investigates if there is evidence for a unique portfolio solution and if
the investment funds’ performance provides evidence for a unique product.
The basic construction, where the investment funds provide a portfolio of different securities
investors can invest in by buying the listed shares issued by the fund, is similar to the mutual fund
construction. The investment fund characteristics that once held unique opportunities for the private
investors have been diluted by a new tax regulation and the introduction of mutual hedge funds with
the same investment opportunities as the investment funds.
I investigate different performance measures in order to find measures that fit the investment funds’
return characteristics. Both performance ratios related to the Capital Asset Pricing Model (CAPM)
and alternatives ratios are investigated. I find that it is important to consider as many measures as
possible when measuring performance, as the measures tell different stories according to how they
interpret the risk-return relationship. The measures provide different rankings for the funds, so
relying on one measure alone would give insufficient information. The assumptions for CAPM are
not fulfilled and I find that the upside measures, Omega and UPR, provided the most unique
ranking of the funds. They both match the investment funds’ characteristics and are easily applied
despite the bear market situation in the data sample used (31-10-2006 till 31-07-2009) in this thesis.
The Small Cap Denmark fund (SCD) and Formuepleje Optimum fund were in most cases the
preferred funds, but only SCD has upside potential. This is however mainly due to another
investment universe, as SCD did not have favourable upside potential in relation to the general
Danish small cap market. This leads to the conclusion that the selected data did not provide
evidence for a unique performance or indications that investment funds are a unique product.
Investment funds are, even though there is no evidence for a unique product, a possible alternative
to mutual funds and mutual hedge funds. |
